The U.S. and EU Can Make Transatlantic Trade Great Again

(Bloomberg View) -- Just when the European Union seemed to have recovered some of its free-trade zeal, it now faces the prospect of a mutually destructive trade war with its biggest economic partner, the U.S. 

Escalation has risks for both sides. The U.S. from counter-tariff measures. And the EU from a fragmented response as some member states are tempted to accept U.S. offers of exemptions in certain sectors. EU leaders should seize this crisis as an opportunity to present a bolder option by offering President Donald Trump -- who prides himself on his dealmaking skills -- a big free-trade bargain. 

The dispute over steel and aluminum is not surprising from a president who sees the U.S. as a victim of unfair trading practices from both Europe and Asia. Trump recently protested the "large tariffs and barriers" the EU imposes on U.S. exports. Rather than raising more, let’s work together to eliminate these obstacles. 

Lifting tariffs is no easy feat. Overcoming the many nontariff barriers such as divergent product standards and regulations will be even more difficult. Negotiations over the proposed Transatlantic Trade and Investment Partnership stalled at the end of the Obama administration because the agreement sought to liberalize highly sensitive sectors where vested interests or public opinion would create political obstacles. 

Yet, in some areas, the TTIP negotiations made progress that can be built upon. Beyond the hard decisions on standards and health and safety norms, a deal should focus on a few sectors such as car manufacturing, food and pharmaceuticals, which could deliver benefits to key Trump constituencies ahead of the U.S. midterm elections. 

Some Europeans might argue against giving Trump a win and instead would want to wait for a new U.S. president after 2020. This is risky. Many European leaders lost a similar bet in the 2016 elections. And even a Democratic administration is no guarantee that talks to open trade will start up again. 

The two sides should also consider the wider geopolitical picture. Despite his tweets warning that the U.S. has been taken for a ride by Europe, Trump knows that the real challenge is China. Its unfair trading practices and tendency to dump overcapacity -- including steel -- onto the global market are challenges that Europe and the U.S. must confront, along with like-minded nations such as Japan. Rather than shooting from the hip and dividing the rules-based trade alliance, we can work together to set the standards and norms for global trade in the 21st century. If we don’t, China will. 

The steel and aluminum dispute not only raises the specter of transatlantic disunity, but of disunity within the EU, too. In theory, Trump could offer exemptions for individual EU states. Of course, it would be politically impossible for those nations not to accept, despite the disastrous consequences for European solidarity. This is why the EU -- as a united block -- must seize this opportunity to propose something bold.

The European Council meeting this week should be the moment to begin making transatlantic trade great again. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Anders Fogh Rasmussen is the former prime minister of Denmark and secretary general of the North Atlantic Treaty Organization. He is the founder and chairman of Rasmussen Global.

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